As part of a raft of welcomed new rules brought in by last year’s Strata Schemes Management Regulation 2016, there is a change to the way developers will be required to manage defects in their building work. This is known as the strata building bond and inspections scheme. This was recently delayed to commence on 1 January 2018, so let’s take a closer look at the scheme ahead of its initiation.
What problem does the defect bond scheme address?
Due to the demand for housing and the property market in larger cities there has been a huge rush of residential strata properties being built in recent years: particularly large buildings in the inner city. The problem is that for these larger apartment blocks, fixing building defects following completion can cost anywhere from $5 million to $15 million all up. In the past, the developers have found it fairly easy to shrug their shoulders free of any responsibility which has often led to owners paying for these costly repairs themselves.
How does the strata building bond and inspections scheme aim to help?
Put simply, the new strata building bond scheme means that for any building contracts signed after 1 January 2018, developers will need to lodge 2% of their contract price with Fair Trading NSW as a bond. If no defects are found at a first and then final inspection by an independent building inspector, the bond will be released back to the developer after two years. If defects are found at an interim inspection, the issues can be rectified using funds from that bond. Upon a final inspection that finds that the defects are addressed any remaining bond will be released.
Why the delay for the bond scheme?
The new strata building bond and inspections scheme was set to commence in 2016 and then delayed until 2017. A second delay has brought this commencement date further down the line to 1 January 2018. That means any building contracts signed before this date are not covered by the scheme.
Fair Trading NSW announced that the delay was to allow for final refinement of procedural and professional requirements before the scheme comes into play.
What if I’m spotting defects in my brand new strata apartment?
There are already some laws in place to help you. NSW home building laws do require that a building is fit for purpose and built with due care and skill. Independent inspection reports are still a good idea between 12 and 18 months following completion. Its really important to consult with your strata manager if you are unsure about your rights and any issues you may come across when buying into a new development as it can be a confusing world.